Risk tolerance is the key limiting factor to innovate better

Risk is part of every innovation journey. Corporation’s risk tolerance defines its ability to innovate better. Either under the cloud of fiduciary responsibility or inherent risk aversion, corporate executives commit innovation budgets and resources, far lower than they can afford. Surprisingly, same corporations take big risks. They dare to acquire companies for multi-million dollars but can’t risk a small percentage on internal innovation. Why is this so?

Partly, this is a result of the way corporations are evaluated by investment community. Corporate executives feel free to invest capital in ways accepted by the market. They spend a lot more to make acquisitions work. History shows that acquisitions hardly succeed. They are not better than rate of failed new ventures. But the pursuit of accelerated growth through acquisition continues. Risk tolerance to known failure paths seems higher than to small unknown bets – true innovative experiments.

In large corporations that don’t gracefully support intrapreneurs, innovation becomes a lip service. Status-quo prevails. If you want to be innovative, there’s no need to take big-bets. Democratise innovation. Create discretionary budgets of money, resources and support self-starters. Start small. Build confidence. Increase risk tolerance to innovate better.

If you are an intraprenuer, pick meaningful pursuits, not happy-engineering projects. Help your sponsors to help you by focusing on value, than privileges. You are the catalyst to build risk-tolerance-capability of your corporation.